The Monding framework contains a lot of guides, tools and examples. The number of topics and elements could overwhelm or confuse people working with it for the first time. The guiding principles are here to help whenever confusion might slowly creep around the corner.
As the user of the framework, you might wonder if you should extend or change your financial concept. You could take a specific step to the next level, e.g., from intermediate to comprehensive level. Or you could spend another two hours investigating how to improve an estimate or a calculation. On the other hand, the accuracy of the basic numbers involved might be so-so at best, and the effort would probably be better spent elsewhere. You need to decide what to do.
As the author and developer of the framework, I often wonder if I should add some piece of content or another fancy Excel sheet. The topic or formula looks so cool, and it may even refer to something that is already part of the framework. On the other hand, it could lead people astray and just add noise rather than value. I need to decide what to do.
These moments call for reflecting on the guiding principles and asking a straightforward question: Does this activity contribute to the larger goals set by those principles? For example, does it clarify a life goal, enhance insights from the financial plan, or make managing personal finance in a “Do it yourself” (DIY) style easier?
The Four Guiding Principles
It’s time to look at the guiding principles of the Monding framework and consider how they could help with the decisions above. Here they are.
- Aim for life goals rather than money.
- Build an individual, customized plan.
- Iterate and continuously improve.
- Foster DIY in personal finance.
Let’s explore things in more detail and see what the principles suggest to you and me.
1. Aim for life goals rather than money
The first principle states that the framework prioritizes goals that go beyond mere financial wealth. It's not about amassing as much money as possible, which can be a challenging and ultimately unfulfilling pursuit, and aiming for higher yield will incur higher risk; no way to avoid that. Instead, consider money as a tool to build the life you desire, and use it with purpose.
Suppose you have 100 grand in the bank. If your goal is to travel the world, having money alone won't achieve the goal. Instead, you might consider spending some of it to visit places like Hawaii, Rome, and other amazing destinations worldwide. In this way, money would help you to achieve your previously defined goals in life.
Goals can be almost anything (as long as they’re legal). You may aspire to travel as in the example above, prepare a down payment for your condominium, build passive income for retirement, and so on. Your goals are as individual as your life.
Life goals frequently need to be broken down into specific objectives. And these objectives should be SMART (specific, measurable, achievable, relevant, and time-bound) to enable better management of effort and resources. Otherwise, how would you ensure transparency about your progress and the current state of achievement?
As a framework user, it’s fundamental to put down some goals and SMART objectives in writing, and work further from there. As the framework developer, I need to provide descriptions and tools that facilitate managing such goals and objectives.
2. Build an individual, customized plan
Everyone is unique. We are of different age, live in different circumstances, have different pains and desires, and have different financial capabilities, different financial literacy, and different readiness to assume risk. And all these differences make us unique.
Your financial plan needs to handle these differences. That’s why the Monding framework outlines a step-by-step process for creating, executing, and enhancing a personal financial plan tailored to your needs. Yes, there are examples for some elements, financial building blocks and other tools to explain and clarify the purpose of each. However, there is no pre-made "one size fits all" plan that you can simply adopt. Just roll your own; it’s probably simpler than you think.
As a framework user, it may be effective and assuring to quickly walk through the process once and get a quick idea how it works. Further walk-throughs will improve the plan based on a better understanding of the framework by then. However, always remain aware that it’s you who chooses, decides, and makes it all your own.
As the framework developer, I need to ensure that there are adaptable components that fit together seamlessly for the bigger picture. Flexibility and customization trump standard solutions.
3. Iterate and continuously improve
Change is everywhere in life, and personal finance is no exception. To evolve and thrive, continuous improvement is essential. The Monding Framework is built on the Deming Cycle in engineering. Let’s apply this to personal finance.
- In the PLAN phase, you determine your goals in life and make them SMART.
- In the DO phase, you develop and implement your personal financial plan.
- In the CHECK phase, you collect the current numbers on your financial activities and compare them against your SMART objectives.
- In the ACT phase, you decide whether a gap needs a change to the plan, or whether your life changed and the plan should follow.
This cycle repeats and improves your finances as long as you consider personal finance to be important for your life, perhaps forever.
As a framework user, you should be aware that the process of managing your personal finances is ongoing. It will continue as long as you wish. At each step, it is okay to change decisions and choices from the previous iteration if there are good reasons to do so. It is also fine to leave everything as it is because your circumstances have not changed that much.
As the framework developer, I should indicate when changes make sense and make sure that the process allows them to be handled gracefully. There should be hints and examples on what to keep, what to change, and when to pivot for a reason.
4. Foster DIY in personal finance
The Monding framework places a strong emphasis on "Do It Yourself" (DIY) in personal finance. Why? Because who else would be as focused on your future as you are? Other people may simply not have the time or inclination to thoroughly investigate your unique situation.
Think of employees at your local bank. How much time and effort do they take to explore your individual situation and your objectives? What financial products do they recommend? Why exactly these ones? How do their recommendations relate to your objectives? And are they eating their own dog food?
The point isn't that bank staff are dishonest, most aren't. It's just that their incentives and yours are not the same, and good intentions don't remove that. DIY sidesteps the problem instead of hoping it won't bite.
So DIY in personal finance offers several advantages:
- Transparency: You have complete insight into your plan and your choices.
- Clarity: You understand the reasoning behind every step of your plan.
- Engagement: You take an active role in managing your own finances.
- Control: You make informed decisions and act responsibly.
The DIY principle ensures that you really own your financial plan. The Monding Framework simply provides knowledge, rationale, and examples to guide you. It's still your financial journey, and the framework is here to help you navigate it effectively.
As a framework user, you should embrace the DIY approach to personal finance. Be open to increasing your financial literacy, take responsibility and benefit from the information and tools provided by the framework.
As the framework developer, I need to describe things as clearly as possible, minimize the effort with effective tools, and communicate with users to understand how to improve the framework itself. Eventually, it’s all about enabling you to take your personal finances in your own hands and actively manage your financials.
Summary
The Monding framework is a structured, straightforward approach to personal finance, directed by four key principles based on goals, customization, continuous improvement, and DIY in personal finance. By applying these principles, we can work toward achieving financial freedom, financial security, and financial independence on our own terms.
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